EOH announced on Tuesday it has entered into an agreement with German listed RIB Software SE (RIB) to sell 70% of Construction Computer Software (CCS) for R444 million.
The JSE-listed technology group said the transaction will be facilitated through its wholly owned subsidiary, EOH Mthombo.
The companies have also entered into a reciprocal put/call option, in terms of a shareholder’s agreement, for the disposal of the remaining 30% of the issued share capital of CCS at the same multiple applied to 31 December 2022 adjusted EBITDA. The sale is capped at $30 million (R424 million).
The company said 90% of the purchase consideration is payable in cash on closing, following fulfilment or waiving of all conditions precedent.
The remaining 10% will be held back by RIB as security for any shortfall in warranted financial results or claims against EOH Mthombo.
The balance due will be payable to EOH Mthombo in cash by no later than 31 July 2021.
CCS is a key provider of enterprise software solutions for the construction and engineering industries.
RIB leads the digitisation of the construction industry with its software technology combined with a market leading cloud platform approach to software services. It is operational in almost 30 countries, has more than half a million licensees and is focused on growing that number to two million over the next two years.
CCS’ access to RIB’s broad development network, international business analysts and development teams, will greatly enhance CCS’ growth strategy.
Through EOH’s remaining 30% holding of CCS, EOH will participate in the company’s growth trajectory. In addition, the put/call arrangement provides an effective exit for EOH after December 2022. Potential also exists to grow the RIB relationship to a broader partnership with EOH ICT in cloud and development services.
“This transaction is a significant milestone in EOH’s strategy to align with key partners which enable the scaling up of unique software businesses identified within the group’s fold,” said EOH in a statement.
“It is also a crucial step forward for EOH’s IP division and RIB is the right partner to unlock CCS’ full potential, enabling both growth and internationalisation.
Further, the company added that the deal is in line with its strategy to build the “EOH of the Future” by reorganising the group into an investment holding company and strengthening its capital structure.
EOH management, at the interim results period, stated that it would unlock R1 billion in cash through strategic partnerships and targeted disposals in order to reduce the group’s debt.
The company said the proceeds of this transaction will go a long way to creating a more appropriate capital structure and will be applied mainly to a reduction of the EOH’s debt and to a lesser extent, for working capital requirements.